Wall St worries tight polls could cloud COVID fight, stimulus

NEW YORK: With the US presidential election result a nail-biter, bankers, traders and financial analysts on Wednesday said Wall Street was worried the ultimate presidential winner could struggle to work with a divided Congress to fight the coronavirus pandemic and pass a quick economic stimulus package.

They spoke to Reuters as several key states reported tight margins between Republican President Donald Trump and Democratic candidate Joe Biden. Though Biden has the lead, millions of votes still need to be counted.

The results so far suggested Biden was likely to win and that Congress will likely remain divided.

Republicans looked likely to keep control of the Senate, which would make it harder for Biden to get legislation passed or have cabinet members and judges approved. Democrats were maintaining a firm grip on the House of Representatives, which could hinder Trump if he wins a second term.

“Now having (a stimulus package) done in early January or February becomes a big feat,” said a bank lobbyist who was not authorised to speak publicly.

“That’s where the minds of bank managements are going to be next and that is certainly what the markets are focused on.”

Many on Wall Street see more stimulus as necessary for economic recovery, but such a package is likely to be smaller and take longer with no “blue wave” victory for the Democrats.

Bankers would be happy with a Biden win because the industry sees him as a steadier and less divisive leader than Trump, one bank executive said.

Although there are concerns the election results could get caught in extended litigation, people feel more confident Biden could negotiate a stimulus package with Republican Senate leader Mitch McConnell than Trump doing so with Democrats in the House, said the executive.

Markets rose, with major U.S. stock indexes up 1.4% to 3.8% on Wednesday, short of the relief rally some had expected but well into positive territory.

JPMorgan Chase & Co chief executive Jamie Dimon, one of Wall Street’s emissaries, urged patience for the final results and said he had faith in the systems that will decide the outcome.

Other prominent financiers took to Twitter to joke about the situation or express personal feelings.

“I was wrong. It hurts,” wrote Mike Novogratz, a former Goldman Sachs Group Inc partner who is now active in cryptocurrency and donates to Democrats.

He had expected voters to hand Biden a more decisive win.

Ahead of the election, the financial industry’s biggest worry was soaring taxes and tough regulation if a “blue wave” put Biden in the White House and Democrats in control of both the Senate and the House.

Many worried that pressure from progressive Wall Street critics like Massachusetts Senator Elizabeth Warren, Vermont Senator Bernie Sanders and Rep. Alexandria Ocasio-Cortez could push Biden further from his historically moderate positions on the economy and regulations.

Those concerns receded as election results rolled in.

“The concept that Elizabeth Warren would be running Treasury and Bernie Sanders would be running the Department of Labour is a lot less likely this morning than it was if we have had that ‘blue wave,'” said Fred Cannon, research director for Keefe, Bruyette & Woods.

David Boies, a prominent corporate lawyer who represented former Vice President Al Gore in a US Supreme Court case that put Republican George W. Bush in the White House, said his Wall Street contacts prefer a divided government, which is usually unable to make extreme changes in the status quo.

The unusual election saw historically high turnout in a politically polarised population and a much larger than usual number of mail-in votes during a deadly pandemic, which slowed vote counting in key states.

The divide between Biden and Trump narrowed from about 200,000 votes to just 6,000 within hours, he noted. He believes the uncertainty could last several days.

“Everyone, whether it’s the man in the street or the man on Wall Street, is fascinated and focused on how this is changing,” Boies said.

As at 6.37 this morning Joe Biden garnered 253 electoral college votes while Trump 213.

A minimum 270 electoral college votes are needed by either party to win. – Nov 5, 2020

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